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TCI + Deccan Chronicle Reports

October 10, 2007

ICICI Securities in a research report has put a BUY recommendation on Transport Corporation of India Ltd and a SELL on Deccan Chronicle.

Transport Corporation of India [TCI]:
TCI is one of the largest players in the domestic logistics industry, has transformed itself from a transportation company to an integrated logistics solution provider. The company has a presence across the entire logistics value chain and is enhancing its role in the high-value supply chain solution (SCS) business.

TCI is the largest integrated player having a 15% market share of the organised logistics industry. Apart from transportation, it operates one of the largest warehousing facilities of about 6.5 million sq. ft. The company has lined up an aggressive Rs 340 crore capex to scale up its business in order to meet increased demand.It plans to increase its warehousing space, buy new trucks, invest in cold chains, and boost its ship fleet strength over the next three years.

At the current price of Rs 115, the stock discounts its FY09E EPS of Rs 7.11 by 16.1x. Given TCI’s leadership position in the organised logistics sector, and transformation to an integrated player, the stock can be valued at 22x its FY09E earnings. Rate the stock an OUTPERFORMER with a target price of Rs 155, an upside potential of 35% from current levels.

Deccan Chronicle Holdings Ltd [DCHL]:
With the entry of Times of India in Chennai, ICICI has downgraded DCHL to SELL from BUY. DCHL would be faced with tough competition in both Chennai and Bangalore from the Times of India (ToI), which is set to foray into the Chennai market in Q4FY08; ToI is the leader in print in India. DCHL’s success strategy of low cover pricing and increasing colour inventory in Chennai is likely to be challenged in Bangalore, which is currently a two-player market post ToI acquiring Vijay Times and Deccan Herald.

ICICI downgrades DCHL from Buy to Sell with a target price of Rs.182 and believe any rise in stock should be used to liquidate positions given the looming aggressive competitive scenario.

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